5 Ways to Improve Your Spending Habits
“The biggest mistake is not learning the habit of saving properly.” Warren Buffet
Warren Buffet is one of the wealthiest people alive, yet he still eats off the value menu at McDonald’s and drives a used car. He definitely isn’t an over-spender.
We all know that we should spend money carefully, but why is it that some people (like Buffet) find it easy, while others have difficulty controlling their spending?
A lot of it has to do with how you learned about money growing up. All of us, whether we like it or not, heard scripts about money from the people we spent time with. If you had parents who argued about money, you may find you avoid conversations about finances as an adult. If your parents were extremely cautious and restrictive with spending, maybe you are more rebellious and free with your spending as an adult. However, if your parents talked to you about money, chances are you picked up their habits too.
Don’t fear. Regardless of the habits you learned from past experiences, you can always correct them as an adult. What better way to learn them than from those who lived them as a kid? We gathered stories from our altruWisdom platform members and asked them about their most memorable saving lessons. Check them out below.
Always run the numbers.
My Dad was a “run the numbers” kind of man. If I wanted a shirt that cost, say $14, he would start by saying, “well, I have to earn $22, pay $8 in taxes and then you can have your t-shirt for $14. So the real cost is $22”. Or sometimes he would put it this way: “Minimum wage is $7/hr, is that shirt worth 3 hours of work? If so, I have some yard work that needs to be done“. He also showed me how my purchase fit in the bigger picture of our finances. He would say, '“I have budgeted $50 for your clothes this season. Do you want to spend 30% of it now? Or would you rather save up for that coat you have been eyeing?” Either way, it was never a simple yes or no. While I’m sure it was annoying at the time, today, I never pick up an item to buy without asking myself these same questions and running the numbers. He helped me understand how to evaluate if I could afford an item - and that helps me be frugal today.
My parents always talked about opportunity cost, which means “What else could you do with that money?” This lesson always worked best when there was something else I really wanted. When I first entered high school, it was the beginning of the era of Lululemon, and everybody had that little logo on their pants. I wanted a pair, badly. At the time, they cost $69. My mom knew how much I begged for them. So if I asked for anything else, it was always presented back in “Lululemon dollars”. For example, if we wanted to go to the movies, she would simply say: “For myself, you and your sister to get into the theater and eat popcorn, it’s going to cost $60. Wouldn’t you rather wait to rent the movie and buy some pants instead? They’ll certainly last longer than a movie”. This worked on me every time because I was trading something I wanted a little bit for something I wanted a lot. I never felt deprived. Today, my opportunity cost measure is a monthly spin studio class that costs $150. It still works every time.
The thrill of getting a deal.
My parents turned deal-hunting into a fun sport. If we were at the grocery store, they would often ask us to “spot the best deal on 2% milk” or “you have $2 to choose the best lunch snack for school this week”. By giving my siblings and I ownership of small financial decisions, they helped us buy into the goal of spending less money. It also helped us learn not to fall for tricky sales tactics at the retail level. Let’s just say I was very young when I started identifying the best “price per pound” for all of my favourite foods - and I’m proud to have that knowledge on hand today. I also know how to plan my groceries, meals and other expenses around what’s on sale. If navel oranges are on mega sale this week, then navel oranges are my new favourite fruit! What stuck with me most is the knowledge that I should pay attention to prices when I’m making purchases and how not to fall for marketing techniques that get us to spend more money without realizing it.
Strict saving means freedom to spend - when you need it.
I grew up with parents who spent too much money. I always remember them using credit cards to make up the time between paychecks, but they seemed to buy everything they wanted. Meanwhile, my grandparents were the opposite, always saving every penny - some would even call them cheap.
I remember, when I was around 15, my uncle passed away suddenly. He lived across the country and my parents had a lot of arguments about who would fly out for the funeral and how on earth they were going to pay for it. I later found out that my grandmother paid for my mom to fly to the funeral. When I had the chance, I asked her how she possibly could afford to spend that money (especially since she was always trying to save money). She taught me a lesson that I’ll never forget. She said: “I am very strict with my spending in my everyday life, 90% of the time. Once in a while, on a rare occasion, I need money suddenly. In those cases, I don’t have to stress because I have saved up. Those situations account for the other 10%, and this gives me peace of mind”. The freedom she had in that “10%” moment was worth the saving we saw in her daily life. After that, I always vowed to be like my grandmother, especially when it came to money matters.
How can your money help somebody else?
Our parents were the ones who said: “You have to finish your food, kids elsewhere who are going hungry!”. But they also took it a step further. They were quick to show us how other people were living on less, and how our generosity could help them. We didn’t have a lot of money, but they demonstrated this lesson in small ways. If I wanted to go to a concert and there was a choice of a $50 ticket or a $100 ticket, my parents would always suggest I buy two $50 tickets and share one with somebody who might not otherwise go. They insisted on an overarching goal of equality all the time. If my parents bought us a new toy, they would buy the same toy for our cousins. Now, as adults, my siblings and I can’t help but think of the world more collectively. This doesn’t directly relate to how we save money, but it certainly makes us think twice about selfishly overspending, and I’m grateful for that lesson. Now that we’re older and our income is higher, that generosity has grown with it. We never really feel tempted to indulge in luxuries, because we have seen how that money can be so much more helpful if used in another way. It takes away the “desire” to always have the latest and greatest things.
You are an average of the people you spend the most time with - and family obviously fits into that equation. Of course, we all come away with some good lessons and other areas where we might need more work. The trick here is to take a moment to jot down the memories and lessons that stuck with you and see how they are impacting your behaviour today.
You are likely strong in some areas and weak in others. This awareness is a great first step to strengthening those areas of weakness and making sure that you pass on a full financial toolkit to your future family too.
Share your memorable money moments in the comments below, we would love to read them!